The cost of healthcare continues to be a significant problem in the United States. For over a decade healthcare costs have been increasing at a rate considerably above that of inflation. With a significant percentage of the United States population being over 40, i.e. the baby-boomers and the generation Xers, there is little doubt in anyone's mind that this trend will continue in the foreseeable future.
According to the annual “Survey of Employer Health Benefits,” a report released by the Henry J. Kaiser Family Foundation and the Health Research and Educational Trust, healthcare costs in the United States rose 7.7 percent between spring 2005 and spring 2006. While this increase was the smallest in seven years, the rates still surged twice as fast as the overall inflation of worker wages. Currently, 16 percent of the United States gross domestic product goes toward healthcare spending, and experts predict that that number will climb to 25 percent by 2030, according to Julius A. Karash's September 27 editorial in The Kansas City Star. Additionally, the number of uninsured people climbed by 1.3 million, bringing the total number of uninsured in the U.S. to 46.6 million.
Given this situation, more and more employees, and/or potential employees, are insisting that healthcare insurance programs be part of their compensation package. Consequently, it is becoming more and more evident that if employers wish to retain their current employees, and/or hire new employees, they must offer some form of health insurance as part of their employee benefit package and, in many cases, the better the health insurance program offered, the better chance the employer has of keeping key employees, and/or hiring the best new employees. In addition, some States now require that employers offer some form of health insurance to their employees and many more States are considering such legislation, as is the Federal Government.
However, for many small businesses, and employees of small businesses, healthcare insurance programs that have reasonably desirable benefits are extremely hard to obtain and, if obtainable, are often so costly that they are not economically viable for either the small business employer or the small business employee. The main reason healthcare insurance is so difficult to obtain and/or expensive for small businesses in particular is that with a limited number of employees, the healthcare insurance providers can't spread their exposure over large numbers of employees, and correspondingly large numbers of premium payments.
As an example, if a small business has five employees, then from the healthcare insurance provider's perspective, there is considerable risk in offering the small business employees heath insurance. This is because if any one of the five employees, i.e., 20 percent of the business's work force, becomes even moderately ill, or incurs even a modest injury, the cost of paying that one employee's medical bills can easily exceed several years of premiums collected by the healthcare insurance provider for all five of the small business's employees. In addition, in the period of time it takes to recoup these costs, it is quite possible yet another employee will take ill or be injured, thereby further increasing the losses carried by the healthcare insurance provider. Consequently, in light of this risk, the healthcare insurance provider either will not offer healthcare insurance to the small business, or if it is offered, as some States require by law, the healthcare insurance is offered at a very high cost to offset the risk.
In contrast, large businesses have numerous employees, and numerous potential premiums for those employees. Consequently, from the healthcare insurance provider's perspective, there is significantly less risk in offering the large business employees health insurance. This is because it is statistically less likely that 20 percent of a large business's employees will be ill, or injured, in the same time frame and if any one, or a small percentage, of the numerous employees becomes even seriously ill, or incurs even a serious injury, the cost of paying the employee's, or employees', medical bills can be easily offset by even modest premiums collected by the healthcare insurance provider for all of the large business's numerous employees. Consequently, in light of this reduced risk, the healthcare insurance providers actively court large businesses and often offer their employees healthcare insurance at significant volume discounts. Indeed, large businesses are so desirable to healthcare insurance providers, and the discounts offered are often so significant, that many large businesses can, and do, offer their employees the choice of multiple healthcare insurance programs, often from multiple healthcare insurance providers.
At the time of filing, it is reported that over 50 percent of all United States Citizens employed in the private sector are employed by small businesses.
Consequently, the inability of small businesses to obtain adequate healthcare insurance programs for their employees at a reasonable cost is truly a national problem and leaves literally tens of millions of people without adequate healthcare insurance coverage each year.